Michael Snedeker is a Boston-area real estate developer. Serving as the executive vice president of Elite Building Corp., Michael Snedeker negotiates financing for commercial construction projects.
Many commercial real estate projects are financed by loans. The process of applying for and receiving a loan is long and involves a large amount of paperwork.
First, the developer approaches a bank with a construction plan and a loan request. The lender is usually a local community bank with a strong understanding of the city’s real estate environment and the players involved.
The bank looks at the loan request and conducts background checks on the developer to ascertain his or her business reputation and credit strength. If the lender approves the loan request, the bank will issue a term sheet that details the terms of the loan. The term sheet is nonbinding and serves as a base for negotiations between the lender and borrower.
After the term sheet is reviewed by the borrower, negotiated with the lender, possibly renegotiated, and eventually accepted, the lender proceeds to underwrite and approve the loan.
While underwriting, the lender takes into account the construction budget, the market conditions, and the capacity of the developers. Some of the documentation requested at this point may include the real estate project proforma, financial statements, engineering plans, and borrower and guarantor tax returns. Once the process is complete, the bank issues the borrower a legally binding letter of commitment and later signs a binding contract with the borrower.
